It has been a slow year by all accounts for buyers and sellers of commercial real estate in New York City, caused in large part by sparring matches between buyers not willing to pay above-market prices and sellers not willing to lower their prices. But the chilly market is starting to warm up.

"Values are falling for the first time in a long time," Cushman & Wakefield Investment Sales Chairman Bob Knakal told Bisnow. "Volume is slowing, the number of properties sold is way off, dollar volumes are way off. It’s narrowing the bid-ask spread, and that narrowing is coming from sellers coming down, not buyers coming up."

Knakal is one of the city's leading investment sales brokers, and in his discussions with clients trying to sell and buy properties, he believes the correction after years of high valuations is upon the city. During the last two years, he said, buyers have been overly cautious of overpaying in the case of a dramatic downturn.

"We don’t expect values to go down significantly because there hasn’t been anything to catalyze this correction," he said. "We’re in a mild correction, but a correction nonetheless, but no one wants to get caught if the correction is more than mild."

Property sales are down 33% this year, Knakal said, in the city, and Manhattan has slowed down by 45%. As of Q3, $12B in properties sold in Manhattan, according to Colliers International research, after the borough recorded $22.1B and $24.1B in investment sales in 2016 and 2015 — now acknowledged to be the current cycle's peak season.

In that same report, Colliers noted that values had not fallen — per square foot, they were actually up 5% year-over-year — but Knakal said the trades he is seeing in the market now will not show up in year-end data; they are expected to close in 2018.

"The statistics in the third quarter and the statistics of what’s going to close in the fourth quarter are going to continue to show a declining market," he said. "All of that positive stuff is leading to more activity and more contract signings, but that’s not going to show up in any statistics until next year. The statistics are going to continue to look crappy for the rest of this year."

GreenOak Real Estate founder Sonny Kalsi has been a seller in the market for the past few years, and now he said his firm is looking to buy. But because of sellers' high asking prices, he said he has been experiencing the stalemate that has hit the entire market, outside of places like the Bronx and parts of Queens.

"It's a classic standoff," he said. "When you have transaction activity drop off like this, there’s a huge price discussion going on. Sellers are looking at historical comps, and buyers are looking forward saying it’s a different environment."

This year will be remembered for being slow, Kalsi said, but he, too, has seen activity pick up in the city. The transactions are not closing anytime soon — just one commercial sale over $10M was filed with the city last week — but he and Knakal are confident things will pick up.

"I think you’ve got some blinking going on," Kalsi said. "We want to be a buyer right now. It’s really just, do you get the price capitulation from sellers to sell? People who have to sell and do something, they’re starting to sell."

Kalsi and Knakal will be two of the featured speakers at Bisnow's New York State of the Market event Thursday at 28 Liberty, all day. Sign up here.